Karlijn Morsink (U Utrecht) Do No Harm? The Welfare Consequences of Behavioral Interventions

Organised by Section Economics

Tue 26 November 2019 12:30 to 13:30

Venue Leeuwenborch, gebouwnummer 201
Room C82
We evaluate the consumer welfare implications of a wide range of behavioural interventions that are typically used in the promotion of index insurance products in developing countries. These interventions are aimed at increasing subjects' understanding of the insurance decision context, or specifically designed to allow us to investigate the impact of nudging. Based on laboratory experiments in the lab in the U.S., where subjects make risky choices, we estimate subject's individual risk preferences, and then randomly assign subjects to our behavioural interventions before they make insurance purchase decisions. We then estimate the expected consumer surplus gained or foregone from observed take-up decisions and compare these across the intervention arms. We also elicit subjects' cognitive functioning and bias and confidence in their understanding of general financial questions and specific insurance purchase tasks and consider to which extent this explains heterogeneity in gains and losses in consumer surplus. We show that while our treatments typically increase take-up on average, they reduce consumer welfare, and more so for those who already score low on literacy and cognitive functioning in the first place.